Can I refinance my home loan during my Chapter 13 bankruptcy?

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In an appreciating housing market, debtors in Chapter 13 bankruptcy sometimes want to know if they can refinance their home loan.

The short answer is: Maybe.

When a debtor is in Chapter 13, he/she is not supposed to take out any new debt unless he/she obtains permission from the bankruptcy judge.

To seek a refinance, the debtor needs to file a Motion to Incur new Debt, identifying the amount of the refinanced loan, the interest rate, the length of the term, the monthly payment, and the lender involved.

If it is a simple refinance to obtain a lower interest rate with no cash out of equity involved, then it is very likely the judge will approve the Motion to Incur for the refinance.

If the debtor is wanting to cash out some or all of the equity, then the debtor will additionally need to file a Motion to Retain the equity proceeds and must give valid and detailed reasons for how the money will be used (e.g., house repairs, medical procedures, etc.).

The debtor would also need to amend Schedules I (Income) and J (Expenses) to show that the debtor can afford the new monthly payment that will be involved with the larger refinanced loan.

It is not a given that a bankruptcy judge will approve the Motion to Retain. The Chapter 13 trustee’s office could also object to the realized equity going all to the debtor if the unsecured creditors are not being paid 100% in the case.

Refinancing Home Loan During Chapter 13 Bankruptcy

All the above assumes you can find a lender willing to work with you while you are in bankruptcy.
If you want to see about refinancing your home loan while you are in Chapter 13 bankruptcy, please contact one of our attorneys. For more information about W M Law, visit our website: or contact our office for a free appointment at 913-422-0909. WM Law is here to help!

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Jeffrey L. Wagoner


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